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Question 1

Closing Entries

Answer 1

1. Close Expenses
2. Close Revenues
3. Close Income Summary
4. Close Drawings

Question 2

TSX stands for?

Answer 2

Toronto Stock Exchange

Question 3

When is perpetual Inventory updated?

Answer 3

As product is sold

Question 4

When is periodic Inventory updated?

Answer 4

At the end of an accounting period

Question 5

Explain 2/10, n/30

Answer 5

A 2% discount is available if payment is made within 10 days. The entire amount is due within 30 days.

Question 6

List two limitations of a good internal control system

Answer 6

1. Collusion among employees

2. Carelessness by an employee

Question 7

Define Fraud

Answer 7

A deliberate misrepresentation of facts with the intent of deceit

Question 8

What is the last step of an audit?

Answer 8

An Auditor’s Report is issued expressing the opinion of the auditor(s) as to the fairness of the financial statements.

Question 9

What companies must be audited?

Answer 9

Public companies must be audited once a year before the statements are made public to its shareholders.

Question 10

What is the name of the contra account that represents uncollectable accounts receivables?

Answer 10

Allowance for Doubtful Accounts

Question 11

What company would be permitted to use the direct write off method for uncollectables?

Answer 11

When most of the sales are for cash; Uncollectibles will not have a material affect; There are usually few if any uncollectibles

Question 12

What one word describes the difference between an accounts receivables and notes receivables?

Answer 12

Interest—Notes Receivables are an interest-bearing asset. A/Rs are not.

Question 13

The loss of an A/R becomes…

Answer 13

An expense

Question 14

Classification of Allowance for Doubtful Accounts

Answer 14

Contra Asset

Question 15

Classification of Sales Returns and Allowances

Answer 15

Contra Revenue

Question 16

Classification of Purchases

Answer 16

Cost

Question 17

Classification of Freight-In

Answer 17

Cost

Question 18

Classification of Machinery

Answer 18

Asset

Question 19

Classification of Transportation

Answer 19

Expense

Question 20

Classification of Notes Receivables

Answer 20

Current Asset

Question 21

Classification of Goodwill

Answer 21

Capital Asset

Question 22

Classification of Land

Answer 22

Capital/Fixed Asset

Question 23

Classification of Capital Stock

Answer 23

Shareholders’ Equity

Question 24

Classification of Interest Earned

Answer 24

Revenue

Question 25

Classification of Land used for extracting oil

Answer 25

Capital Asset

Question 26

Classification of Retained Earnings

Answer 26

Shareholders’ Equity

Question 27

Specific Identification

Answer 27

Actual cost of individual units is known

Question 28

Last In First Out

Answer 28

The last units purchased are the first units sold

Question 29

First In First Out

Answer 29

The first units purchased are the first units sold

Question 30

Average Cost

Answer 30

Inventory values are assigned the same per-unit cost (old and new)

Question 31

What type of asset is associated with Depreciation?

Answer 31

Fixed Asset (Plant and Equipment)

Question 32

What type of asset is associated with Amortization?

Answer 32

Capital Asset (Goodwill)

Question 33

What is the maximum number of years an Intangible Asset (Capital Asset) can be amortized over?

Answer 33

40 years

Question 34

In a partnership explain Limited and Unlimited Liability.

Answer 34

• Limited Liability—limited partners are investors and do not usually participate in the management of the business. They are limited to the amount of their investment within the business.
• Unlimited Liability—All partnerships must have one general partner who has unlimited liability—Unlimited partners are personally responsible for all of the debts incurred by the firm.

Question 35

Are partnerships required to pay income tax—explain.

Answer 35

No—Partners pay personal income tax on their share of the net income of the partnership.

Question 36

Contributed Capital refers to …

Answer 36

Capital Stock or ownership by shareholders.

Question 37

What account is used to represent the net income of a corporation that is left in the company?

Answer 37

Retained Earnings